Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Click here for the full text of this decision FACTS:American Energy Services (AES) went into business in 1996. Ed Vanegas, Jimmy D. Halman, Sam Armstrong, Alex Carbajal, Roger Farrington, Curtis Huff and Tito Betancur (the appellants) alleged in their petition that they were hired by AES in 1996. The appellants were at-will employees of AES. The appellants alleged that in 1997, AES, by and through its authorized agent or agents, made the following promise to them: “[I]n the event of sale or merger of [AES], [appellants] would receive 5% of the value received for such shares or sale of assets.” The appellants also alleged that AES made the promise as an inducement for them to continue employment with AES. The appellants further alleged that, after AES merged with AES Acquisition Inc. in 2001, AES failed to pay them any proceeds from the merger. Therefore, the appellants claimed that AES breached its agreement to pay them 5 percent of the proceeds from any sale or merger. The appellants sought to recover damages from AES under a breach of contract theory. The appellants alleged that AES’ shareholders were individually liable for the damages, because the shareholders had “effectively denuded the corporation of assets.” AES and its shareholders filed traditional motions for summary judgment asserting that AES’ alleged agreement was unenforceable for two reasons. First, AES asserted that because AES’ alleged promise to appellants depended on the continued employment of appellants, who were at-will employees, the alleged promise was illusory and did not provide the consideration necessary for a binding contract. Second, AES asserted that the alleged agreement failed to comply with the statute of frauds. In response, the appellants asserted that a binding unilateral contract existed. The appellants argued that their performance of the action requested by AES in its promise � appellants’ continued employment with AES until the merger in 2001 � supplied the consideration necessary to support AES’ promise to pay them 5 percent of the proceeds from any sale or merger. Thus, the appellants asserted that AES’ “arguably illusory promise was accepted by [their] performance and became enforceable as a unilateral contract.” Appellants also argued that the alleged agreement did not violate the statute of frauds , because it could have been performed within one year. The trial court granted summary judgment to AES and its shareholders. HOLDING:Affirmed. A party pursuing a breach of contract claim must prove that a valid contract existed. The appellants asserted that a valid unilateral contract existed, because AES’ promise constituted an offer of an incentive bonus that they accepted by performance, i.e. their continued employment until the time of the merger. A unilateral contract, the court stated, has only one promisor. The promisee commits himself to nothing. A unilateral contract is completed by the promisee’s performance of an act or acts called for by the promisor. When the promisee delivers the bargained-for performance, the court stated, the promisor then becomes bound to provide the promised benefit. Until that time, the promisor may revoke the offer at any time. Citing the Texas Supreme Court’s 1994 decision in Light v. Centel Cellular Co. of Texas, the court stated that promises depending on continued employment of at-will employees are illusory. At-will employees, the court stated, may contract with their employers on any matter except those which would limit the ability of either employer or employee to terminate the employment at will. Consideration for a promise, by either the employee or the employer in an at-will employment, cannot be dependent on a period of continued employment. Such a promise would be illusory, the court stated, because it fails to bind the promisor who always retains the option of discontinuing employment in lieu of performance. The appellants, the court stated, asserted that the concept of illusory promises does not apply to unilateral agreements. But the court concluded that a nonillusory promise is required for the formation of a binding unilateral contract. In this case, the court stated, AES did not make a nonillusory promise. Therefore, the court held that the appellants could not make AES’ promise enforceable by performance, and no unilateral contract was formed. Moreover, the court stated, the appellants could not convert AES’ illusory promise into a binding non-illusory promise by their performance. Therefore, the parties did not form a binding unilateral contract. Thus, because the summary judgment evidence established that no contract existed, the trial court did not err in granting summary judgment to appellees. OPINION:McCall, J.; Wright, C.J., McCall and Strange, J.J.

Want to continue reading?
Become a Free ALM Digital Reader.

Benefits of a Digital Membership:

  • Free access to 1 article* every 30 days
  • Access to the entire ALM network of websites
  • Unlimited access to the ALM suite of newsletters
  • Build custom alerts on any search topic of your choosing
  • Search by a wide range of topics

*May exclude premium content
Already have an account?


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.